SCOTUS rules landowners have no recourse when government regs undermine property values

June 25, 2017

Put simply, today’s decision knocks the definition of ‘private property’ loose from its foundation on stable state law rules,” Roberts wrote. The ruling “compromises the Takings Clause as a barrier between individuals and the press of the public interest.”

When governments issue regulations that undermine the value of property, bureaucrats don’t necessarily have to compensate property holders, the Supreme Court ruled Friday.

The court voted 5-3, in Murr V. Wisconsin, a closely watched Fifth Amendment property rights case. The case arose from a dispute over two tiny parcels of land along the St. Croix River in western Wisconsin and morphed into a major property rights case that drew several western states into the debate before the court.

Chief Justice John Roberts, in a scathing dissent, wrote that ruling was a significant blow for property rights and would give greater power to government bureaucrats to pass rules that diminish the value of property without having to compensate property owners under the Firth Amendment’s Takings Clause.

“Put simply, today’s decision knocks the definition of ‘private property’ loose from its foundation on stable state law rules,” Roberts wrote. The ruling “compromises the Takings Clause as a barrier between individuals and the press of the public interest.”

Donna Murr, in a statement provided by the Pacific Legal Foundation, the libertarian law firm that represented the family in the case, said her family was disappointed by the result.

“It is our hope that property owners across the country will learn from our experience and not take their property rights for granted,” Murr said. “Although the outcome was not what we had hoped for, we believe our case will demonstrate the importance of taking a stand and protecting property rights through the court system when necessary.”

In 2004, Murr and her siblings sought to sell one of two parcels of land that had been in the family for decades. Murr’s parents bought the land in the 1960s, built a cabin on one parcel, and left the other parcel undeveloped as a long-term investment.

The family attempted to sell the vacant parcel to pay for renovations to the cabin, but were prevented from doing so by regulations restricting the use of land along rivers like the St. Croix approved by the state in the 1980s, long after the purchase of both lots.

Those regulations effectively gutted the value of the Murrs’ property. The property was appraised at $400,000 before the Murrs tried to sell it. When the family came to the county, now the only eligible buyer, the county offered $40,000.

To avoid liability in the case, the state and county told the Murrs they could combine the two parcels of land for regulatory purposes. This meant that even though the two pieces of land were separate and the Murr family paid taxes on them separately, the family would be unable to make a takings claim for one of the two parcels.

In short, they could sell both lots together, but not one or the other.

Lower courts agreed with the government interpretation and the Supreme Court on Friday upheld the court rulings.

“Treating the lot in question as a single parcel is legitimate for purposes of this takings inquiry, and this supports the conclusion that no regulatory taking occurred here,” Justice Anthony Kennedy wrote in the majority opinion. “They have not been deprived of all economically beneficial use of their property.”

Several western states filed amicus briefs in the case on behalf of the Murr family (as did the Reason Foundation, which publishes this blog). Though states like Nevada and Arizona did not have a direct interest in the Murrs’ ability to sell their vacant land, they saw the case as having important implications for conflicts over federal lands.

Many state governments own contiguous lots and large bodies of water near areas owned by the federal government (military bases, national parks, etc). If those government bodies are allowed to merge contiguous lots for regulatory purposes, the federal government could impose severe restrictions on state land and wouldn’t have to pay consequences, warned Ilya Somin, a professor of law at George Mason University who authored the amicus brief on behalf of those western states.

“In at least some cases, today’s indeed ruling allows the government to avoid compensating property owners for the taking of their land, merely because they also own the lot next door,” he writes. “But the vague nature of the test established by the Court makes it very hard to figure out exactly when that might happen.”

With Friday being the 12th anniversary of the infamous decision in Kelo v. New London (in which the Supreme Court upheld an objectionable use of eminent domain), Somin jokes that maybe property rights advocates should hope the court doesn’t release any more rulings on June 23.

Roberts, in his dissenting opinion, stressed that the court’s ruling in Murr could allow for “ad hoc, case-specific consideration” of takings claims, thus undermining constitutional protections that should be consistent and predictable for property owners. Meaning more leeway for governments to do what Wisconsin did to the Murrs.

“The result is that the government’s goals shape the playing field,” Roberts wrote, “even before the contest over whether the challenged regulation goes ‘too far’ even gets underway.”